Bitcoin prices rise nearly 6% after falling to lowest level since February

Bitcoin prices bounced back today, climbing after falling to their lowest level in more than four months amid weak market conditions.

The world’s most prominent digital currency reached as high as $56,856.61 this afternoon, according to data from CoinMarketCap.

At this point, the cryptocurrency was up more than 5.8% after falling to $53,717.34, its lowest value since late February, shortly after midnight EST, additional CoinMarketCap figures show.

After rising to the aforementioned daily level above $56,800, the digital asset experienced some volatility, but it has held most of the gains it generated earlier today.

When explaining bitcoin’s recent price swings, some analysts stated that the digital currency was oversold when it fell over the past 24 hours.

Several media reports pointed to the announcement that the trustee for Mount Gox had begun making payments to certain creditors as the reason why the digital currency fell to its lowest level in over four months within the last 24 hours.

Tim Enneking, managing partner of Psalion, commented on this development, but emphasized that several factors contributed to the losses in bitcoin.

“In a market that was already relatively weak due to post-ATH consolidation, the usual summer doldrums, and the SEC teasing the actual ETH ETF spot trading launch date, concerns about BTC takers dumping Mt. Gox (whether well-founded or not) was clearly the proverbial straw that broke the camel’s back and brought BTC prices down by $60K to almost $53K,” he said via emailed comments.

Armando Aguilar, an independent cryptocurrency analyst, also pointed out that multiple variables contributed to the decline in digital currency markets.

“As new supply entered the market from Mt. Gox Trustee, it showed transfers of BTC to unknown addresses, and the German government was also preparing to unload additional supplies. A low fear and greed index spooked the market, all of which caused prices to fall across the board,” he said via emailed comments.

After prices had fallen, this resulted in bitcoin being oversold, which sent the digital currency soaring, Aguilar added.

Julio Moreno, head of research for CryptoQuant, also attended, offering a different take on the situation.

“Prices have fallen mainly due to selling/profiteering by large investors (whales) and medium miners,” he said via Telegram.

“The sale by Mount Gox and other entities (the German Government) is relatively small compared to the overall pool of Bitcoin money,” Moreno added.

“Some metrics on the chain signaled oversold territory as prices hit $53k, which may be why they bounced back sharply. For example, traders’ unrealized profits reached negative levels not seen since the FTX crash.

He included the chart below, which uses CryptoQuant data, to illustrate these developments:

Moreno also pointed out that the amount of money seized by the US and German governments represents a very small fraction (roughly 1.6%) of the total realized value of bitcoin.

The difference can be visualized using the following graph:

Following this, sales of Mt. Gox may not be as big a blow to the cryptocurrency markets as some might think, said Enneking, who noted that investors who get their bitcoin back probably won’t sell it right away.

“Unless one assumes that all Mt. Gox BTC recipients are idiots,” “they won’t suddenly dump all their long-awaited BTC right after receiving it – and since they’ve been waiting 10 years already, a few more months waiting for the price to heal?” he said.

“So at some level, BTC is clearly oversold, and apparently the market believes that level is in the mid-50s,” Enneking asserted.

“Regardless, once BTC actually dissolves and the sky miraculously fails, BTC will enjoy an immediate and very healthy rebound!” he predicted.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.